Consumer credit reports can have a significant impact on a person’s life when it comes to borrowing money, getting insurance, housing, or employment. Therefore, the content of a consumer’s credit report can really matter.
The federal Fair Credit Reporting Act (FCRA) determines what information can be listed in a consumer credit report and for how long. The FCRA is codified at 15 U.S.C. § 1681 et seq. The FCRA was first enacted into law in 1970. The FCRA governs the collection, dissemination and general use of consumer credit information (and other information contained in a credit report). The three primary consumer credit reporting companies governed by the FCRA are TransUnion, Experian and Equifax. The terms of the FCRA can be enforced both by private parties and the US Federal Trade Commission (FTC).
The FCRA provides that a bankruptcy can be listed on a consumer’s credit report for ten years from the date of filing. The FCRA specifically states that no consumer reporting agency may make any consumer report containing “Cases under title 11 [United States Code] or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years.” [15 USC § 1681c]
Therefore, Chapter 7 and Chapter 13 bankruptcies can be listed on a credit report for 10 years from the date of filing. However, the three primary consumer credit reporting companies will remove a Chapter 13 bankruptcy from your credit report after 7 years. The law allows them to leave it on the credit report for up to 10 years. But they choose to remove a Chapter 13 bankruptcy after seven years as an incentive to consumers to file a Chapter 13 (instead Chapter 7) and attempt to repay their creditors as best they can.
If You Don’t File – Good News / Bad News
A person with financial problems might consider avoiding bankruptcy because of the potential impact on their credit report. However, if you don’t file and a judgment is entered against you, the judgment shows up on your credit report for at least 7 years. However, in Washington State a judgment is enforceable for 10 years and can be renewed, if not paid, for another ten years! So, a judgment for a bad debt might fall off your credit report in 7 years BUT might still be enforceable for up to TWENTY years. An unpaid judgment allows the creditor to garnish wages and bank accounts, and engage in other collection activities.
THE POINT: Sometimes not filing a bankruptcy can be far worse than filing a bankruptcy, both for your credit report and the impact on a consumer’s daily life.
FREE INITIAL CONSULTATION
A bankruptcy can negatively impact your credit report and rating. However, not filing could be worse. We offer a free initial consultation to review your bankruptcy and nonbankruptcy options. If we can help, just let us know.